Progressive Earnings: Strong Improvement Amid Industry Headwinds

Progressive’s third-quarter results show that the company continues to handle current industry headwinds better than peers and suggest that pricing actions are helping to restore profitability. If all of this holds, the bounceback in profitability will be a bit quicker and sharper than we expected. However, we remain comfortable with our $114 fair value estimate in the meantime and will maintain our narrow moat rating. While we see Progressive as one of the most attractive insurance franchises in the United States, the stock currently looks materially overvalued to us. We think the current share price implies that Progressive's long-term future will be much stronger than its past, and we don't see a justification for that view.